The Complete Business Loan Application Checklist
Preparing Your Business Loan Application
There’s no doubt about it. Finding a small business loan is stressful.
You have a lot of steps to take and a lot of boxes to check off. First, you need to figure out what kind of business loan you need to apply for. Then, you need to figure out which small business lender you should apply to work with.
And once you’ve found your lender, the hardest part—actual business loan application—is still ahead of you.
Before you dive deep into the application process, take a step back and consider our business loan application checklist. Here is everything a lender might ask you to provide when applying for a business loan:
- Form of valid ID
- Personal background
- Resume
- Business plan
- Industry type
- Time in business
- Business license
- Proof of ownership
- Customer list
- A/R aging statement
- Bank statements
- Balance sheet
- Profit and loss statements
- Tax returns
- Business credit score
- Personal credit score
- Business debt schedule
- Rent/real estate schedule
- Landlord subordination form
- Latest accounts payable statement
Let’s evaluate all of these in closer detail.
Business Loan Application Requirements
During the business loan application process, the lender will ask you a lot of questions, and not every lender will ask the same questions. In fact, each lender will have different requirements for their applications.
To make sure that your application process is seamless, you should be prepared to provide any of the information lenders might require, plus all of the documentation necessary to prove your answers.
Let’s go through every question a lender might ask you in your loan application and what kind of materials you’ll need to answer them.
Part I: Personal Information
Your business loan application will start broad and narrow in, so, the first step to any business loan application will be introduction. It might seem too obvious, but the lender will want to know exactly who you are, and what your experience is.
To answer this question, lenders might have you provide the following. If you can check all of these boxes, you’re off to a good start.
One Form of Valid ID
This is the easiest step: Make sure you have a license or government-issued ID.
Lenders will want to make sure you are who you say you are. They usually ask you to provide this during the closing process of your loan.
If you don’t have this kind of ID to provide, ask your lender if they’re willing to accept anything else on your business loan application.
Personal Background
Lenders might also want to know you just a little better. On top of identification, you should be prepared to provide a document that states your personal background.
Why?
Well, lenders want to make sure you check out. They can do this by knowing your previous addresses, names you’ve used, your criminal record, educational background, etc.
Part II: Business Information
The next logical question your lender will have: “What do you do?”
As an entrepreneur, you live and breathe your small business, but your lender doesn’t. You’ll need to introduce your business and convince lenders that financing it is a smart move.
To cross this off the checklist, you’ll probably need to provide the following.
Business Plan
Most lenders will require a business plan in your small business loan application. Your business plan is a great opportunity to convince the lender that investing in your business is a smart move.
If you don’t already have a business plan written, here’s the gist of it: You’ll need to describe your business’s goals, both financial and qualitative. Financial projections should include your future sales, profits, cash flow, income, and so on. After that, get into the deeper issues.
What makes your business unique in your market? Why do you provide an important product or service with potential? Where do you see your business growing?
Note that traditional commercial lenders like banks will absolutely want to see a business plan. (That means you’ll need one for your SBA loan application, too.)
Industry Type
Depending on the type of business loan you’re applying for, certain industry types will be a no-go for lenders.
Take the SBA, for instance. Just by skimming through the eligibility standards for their 7(a) loan program, you quickly realize how your industry might affect the kind of capital you qualify for.
Private clubs, religious institutions, private clinics, agricultural businesses, fishing vessels, and more have special criteria they need to meet in order to qualify for an SBA loan.
After the SBA, lenders will take different approaches to your business’s industry type. Some industries are obviously riskier than others, so know what type of industry will be a deal-breaker for your lender.
Time in Business
This is another easy question to answer: How long has your business existed?
As you can probably guess, the longer the better. If you’ve been around for more than five years, it’s obvious that you can withstand all the challenges that can shake a small business.
A startup, on the other hand, is riskier for lenders, as there is a greater chance that your business will fold before you’re able to pay your loan back.
Proof of Ownership
Following the same theme, lenders might ask you for proof of ownership. The way you prove your ownership will depend on the kind of business you run.
- Sole Proprietorship: As the sole proprietor of your business, your business is tied to your social security number. To prove your sole proprietorship, you should be able to provide your tax returns with the business’s Schedule C, and/or the “Doing Business As” (DBA) filing from your city/county that states you established the business name.
- S-Corporation: As the sole owner of an S-Corporation, your tax return is associated with your social security number, so your return with the business’s Schedule C shows ownership. Articles of incorporation should also work.
- C Corporation: With a C-Corporation, your articles of incorporation will show your name as an original owner. Or, a share certificate will also prove ownership.
- Limited Liability Company (LLC): Whether you’ve created an employer ID number or you’ve tied your taxes to your social security number, your LLC articles of organization should show your name as a member who established the business.
Part III: Customer Information
Next item on the business loan application checklist is your customers. Lenders might want to get a sense of who your business’s clients are. They’ll want to know who you do business with, what kind of customers you have, whether they pay you on time, and so on.
A/R Aging Statement
Your latest Accounts Receivables Aging Statements will show the lender how long your invoices go unpaid, which is especially relevant if you’re considering invoice financing.
This helps lenders gauge what kind of customers your business works with, and how their financials look, too. How they pay you has a direct impact on your cash flow.
Part IV: Financial Information
This is the heart of your business loan application, so it’s an equally big part of your preparation checklist. Yes, lenders want to make sure they know who they’re lending to, but in the end, they really want to know if you can afford your business loan.
Lenders are letting you borrow money after all, and they want to make sure they’ll get their money back. Depending on the loan you’re applying for, lenders will require different documents to see where your financials stand.
But in general, you could be asked to provide any of the following information.
Bank Statements
Lenders will typically ask for two years of bank statements. If your business hasn’t existed for two years, give whatever you have and supplement what’s missing with other documentation.
In general, lenders will want to see that your financials are healthy. They can also use your bank statements to calculate your average bank balance.
By looking at your average bank balance, lenders can gauge how well you manage your cash flow—and whether you’ll be able to repay them even if things start going south.
Balance Sheet
Your business’s balance sheet gives a good snapshot of your financial health and says a lot about how your business functions.
Put simply, balance sheets will make clear what you have and what you owe, showing how well you manage your assets and liabilities.
You can pull your balance sheet reports from your accounting software, like QuickBooks, or you can put one together yourself.
Profit and Loss Statements (Income Statements)
By including your business’s profit and loss statement in your business loan application, lenders can get a sense of your business’s revenue and expenses. Most lenders will ask for both a year-to-date profit and loss statement, updated within the last 60 days, and statements from the last two years.
These documents show where your money is coming from and where it’s going to, verifying that nothing questionable is going on in your business’s inner workings.
Tax Returns
If you’re applying for a traditional term loan, you’ll definitely need to provide tax returns in your business loan application.
Lenders will want to see tax returns to verify your income and revenue. To do this, you’ll probably need to provide both your personal and business tax returns.
Business Credit Score
By checking your business credit score, lenders get an idea of how your business has handled debt in the past. If your business has never borrowed money or used a business credit card before, you won’t have a business credit score.
Though strong business credit will certainly strengthen your business loan application, limited business credit won’t necessarily mean that you won’t be eligible for a business loan.
Personal credit score
Business credit scores don’t matter so much because business lenders will rely heavily on a business owner’s personal credit score while underwriting a business loan application.
Your personal credit score will show how trustworthy you are as an individual borrower. And because you’re a small business with not much experience under your belt, lenders will use your personal finances to gauge how you’ll manage your business finances.
Because your credit score is such an important part of your business loan application, make sure you’re staying on top of it. You’ll want to aim for a score of at least 600, and if you can get higher than that, you’re in good shape.
Lower than 600, though, and you might have a hard time finding a good deal in terms of interest rates. Check out all the business loans for bad credit to find your most affordable options.
Part VI: Outstanding Debts
This might not be your first time ever filling out a business loan application, so you might already be familiar with this section of the checklist you’ll need to complete. In fact, if you’ve taken out a small business loan before, lenders will want to know that.
But, they won’t just want to know about any debt you owe. They’ll want to be filled in on any other payments you send to people, from rent payments to outstanding invoices.
To answer this question, you should be prepared to provide this information.
Business Debt Schedule
Your business debt schedule will show all of your company’s outstanding loan, credit amounts, and monthly payments. A debt schedule will clue lenders in on who else you owe, and how you’re managing that outstanding debt.
If you’ve never put together a business debt schedule, don’t worry, it can just be an Excel spreadsheet.
Rent/Real Estate Schedule
Lenders could ask you to provide a schedule of income and the expenses associated with any property your business owns or rents.
Most banks and mortgage brokers have their own specific forms to put together, but they’ll all have the same information:
- Property address
- Type of property (home, office space, apartment, etc.)
- Status (rented, owned, sold, etc.)
If you rent the property:
- Gross annual rent payment
- Monthly rent payment
If you own the property:
Landlord Subordination Form
This requirement will only show up on a few business loan applications, but it’s worth mentioning.
Lenders might want to see a landlord subordination form, which is a landlord’s assurance that the tenant (you) will be able to stay in his or her property for the duration of the lease. (Even when the landlord no longer owns that property.)
If you run a brick-and-mortar shop, this form is incredibly important for a lender to see in your business loan application. Getting kicked out of a property is bad news for both a small business owner and their lender.
Latest Accounts Payable Statement
Your latest accounts payable statement shows the money your business owes on bills and invoices from vendors you work with. You should be able to show your accounts payable on your balance sheet.
If you want to create your own, you can put together a report of all your company’s outstanding invoices and bills—just like that A/R Aging Statement you put together earlier.
Prepping for Your Business Loan Application: Best Practices
Your business loan application might seem overwhelming, but it doesn’t have to be. By breaking it down into simple questions that a lender might ask you, you can easily compartmentalize everything you might need to provide.
Follow these best practices when you’re completing your business loan application:
- Prepare, prepare, prepare: Stay on top of your small business loan application checklist. It takes time to put together all this paperwork, but it’ll save you money on your loan in the long run.
- Be honest: If you’re fudging the details on any of the information you’re giving lenders, they’ll find out.
- Be realistic: If you overestimate your ability to take on a business loan, you can end up hurting yourself in the future.
When you’re providing all this information on your business loan application, be realistic about your business’s capacity.
The Bottom Line
Now you have all the information you need to complete your business loan application. While it may seem like a lot of work at first, once you get started you’ll find that it’s manageable. Furthermore, working diligently to complete your business loan application will ensure no hangups during the underwriting process. So take your time and be thorough, and you’ll get the financing you need in no time.4
